The waiting is the hardest part..Now that the hard part of getting the Trans Mountain pipeline expansion into the ground is almost complete, the Canadian Energy Regulator (CER) is almost ready to consider the even trickier question of how much producers should pay to foot the bill for massive cost overruns..The CER on Thursday issued a notice of hearing for “interested parties” to participate in a review of interim tolls once the pipeline is finally complete..According to Trans Mountain, ‘line fill’ or actually filling it with crude oil to bring it up to pressure, is to begin by the end of year. It’s the first step to actually starting deliveries through the Port of Vancouver in the first quarter of 2025..Until then it will operate under an interim toll structure while the CER reviews an application to increase them in order to cover an estimated $20 billion in overruns..The project, which was originally expected to cost $7.5 billion when the federal government bought it, swelled to almost $31 billion due to a litany of court challenges, protests, floods and finally the pandemic..When shippers contracted to move barrels on the line, they agreed to cover 'reasonable' overruns in the form of higher tolls. But now they’re balking at being forced to cover the entire bill..Trans Mountain says anchor shippers never agreed “to any limit on the amount” to recover ‘uncapped’ costs in the form of higher shipping fees; the producers counter they were never consulted or informed as to what those costs actually were — or are..It effectively amounts to 'a blank cheque' to Trans Mountain for all uncapped costs, Calgary-based Cenovus Energy wrote in a submission to the CER. “Not only is that suggestion commercially absurd, it is contrary to the overall scheme” of the contract provisions..Canadian Natural Resources called it an “untenable situation.” .“The tolls are too high and will harm the economic competitiveness of Canada's oil industry and the public interest.” .Other intervenors have said the pipeline is uneconomic and it would be cheaper to leave the oil in the ground..A date for the hearing hasn’t been set yet. But the CER said it would consider appropriateness of the allocation ‘capped’ and ’uncapped’ costs; the fairness and reasonableness of the existing tolling agreements and potential repercussions on Trans Mountain's financial standing and any possible impacts to the market..All in the “public interest,” of course. .The latter is particularly important as the federal government preps a sale of its interest to third parties, including indigenous groups. Trans Mountain CEO Dawn Farrell said last week a sale could wrap up by early 2025, ahead of a looming federal election. .Exactly how much it’s worth is anyone’s guess..A recent Reuters survey of five analysts and investors valued Trans Mountain between $15 billion and $25 billion, based on factors including projected earnings and oil shipping tolls..“We’ll have to see how much the government is going to eat,” said Newhaven Asset Management president Ryan Bushell, which holds shares in energy infrastructure firms.
The waiting is the hardest part..Now that the hard part of getting the Trans Mountain pipeline expansion into the ground is almost complete, the Canadian Energy Regulator (CER) is almost ready to consider the even trickier question of how much producers should pay to foot the bill for massive cost overruns..The CER on Thursday issued a notice of hearing for “interested parties” to participate in a review of interim tolls once the pipeline is finally complete..According to Trans Mountain, ‘line fill’ or actually filling it with crude oil to bring it up to pressure, is to begin by the end of year. It’s the first step to actually starting deliveries through the Port of Vancouver in the first quarter of 2025..Until then it will operate under an interim toll structure while the CER reviews an application to increase them in order to cover an estimated $20 billion in overruns..The project, which was originally expected to cost $7.5 billion when the federal government bought it, swelled to almost $31 billion due to a litany of court challenges, protests, floods and finally the pandemic..When shippers contracted to move barrels on the line, they agreed to cover 'reasonable' overruns in the form of higher tolls. But now they’re balking at being forced to cover the entire bill..Trans Mountain says anchor shippers never agreed “to any limit on the amount” to recover ‘uncapped’ costs in the form of higher shipping fees; the producers counter they were never consulted or informed as to what those costs actually were — or are..It effectively amounts to 'a blank cheque' to Trans Mountain for all uncapped costs, Calgary-based Cenovus Energy wrote in a submission to the CER. “Not only is that suggestion commercially absurd, it is contrary to the overall scheme” of the contract provisions..Canadian Natural Resources called it an “untenable situation.” .“The tolls are too high and will harm the economic competitiveness of Canada's oil industry and the public interest.” .Other intervenors have said the pipeline is uneconomic and it would be cheaper to leave the oil in the ground..A date for the hearing hasn’t been set yet. But the CER said it would consider appropriateness of the allocation ‘capped’ and ’uncapped’ costs; the fairness and reasonableness of the existing tolling agreements and potential repercussions on Trans Mountain's financial standing and any possible impacts to the market..All in the “public interest,” of course. .The latter is particularly important as the federal government preps a sale of its interest to third parties, including indigenous groups. Trans Mountain CEO Dawn Farrell said last week a sale could wrap up by early 2025, ahead of a looming federal election. .Exactly how much it’s worth is anyone’s guess..A recent Reuters survey of five analysts and investors valued Trans Mountain between $15 billion and $25 billion, based on factors including projected earnings and oil shipping tolls..“We’ll have to see how much the government is going to eat,” said Newhaven Asset Management president Ryan Bushell, which holds shares in energy infrastructure firms.
